The iPhone is a nightmare for carriers

[J-Money]

Nope, not trolling, just reporting what I saw on CNN...


And to all the folks that were quick to jump at the 45% EBITDA and claiming that as profit -- what the heck are you thinking -- if the PROFIT margins were that high every company in the world would be switching into the cellular industry.

That carriers have to pony up a big chunk of change upfront for each iPhone is well known and not in dispute. The average iPhone user hammers the net harder than the average cellular user but maybe not more than the average smart phone user. The bottom line is that the carriers have to shell out up front cast that they hope to reclaim and as the market for iPhones and other smart phones is continuing to increase you have a kind of ponzi scheme in reverse. The carriers will make a profit over the 2 year contract but with new customers hitting them for upfront cash it will take a while.

For a board with folks that are supposed to be smart too many chose to be dumb...


Brian

Where are "all the folks" that claimed the 45% was profit? We are all aware you hate Apple, but please don't let that see things that aren't really there.

How many people here said "profit margin"? Or really refer to these as actual profits?

I refered to it as a "margin". Which it is, yes? and 40%+ EBITDA is HIGH, yes?

And the fact still remains. A 42% EBITDA with millions more revenue per month is better than 47% with less income. In the end they get MORE INCOME, not a higher percent of profit, but REAL MONEY.

Who likely makes more money (actual profits) - carrier 1 with a 40% EBITDA and a revenue of a $1 billion or carrier 2 with a 50% EBITDA and a revenue of $1 million?

Sure, relative to sales carrier 1 appears to perform worse, less efficient, whatever you want, but the ACTUAL profit is probably higher, because they make a ton more money.

Sure, it would appear carrier 2 has a better ability to earn a profit, maybe for every $1 they earn they keep $0.05, and maybe carrier 1 for every $1 they earn is only keeping $0.02. But carrier 2 stilll only earned $50,000 while carrier 1 earned $20,000,000.

Who's happier?

Understand? If the carriers earnings were going DOWN because of the iPhone they'd drop it.

They aren't.

You can't look solely at EBITDA to determine if something is good or bad.

 

[preslove]

i think Tmo also has a small biz $40/mo 1000 min, unlimited data plan, but you have to again sign a 2 yr contract.

Looks like you actually have to have a small business to get that plan, though

 

[Binky]

I refered to it as a "margin". Which it is, yes? and 40%+ EBITDA is HIGH, yes?

Yes, no.

And the fact still remains. A 42% EBITDA with millions more revenue per month is better than 47% with less income. In the end they get MORE INCOME, not a higher percent of profit, but REAL MONEY.

Not necessarily. EBITDA is not "income." its a measurement invented by analysts to make comparison of companies in the same industry easier. That's all it is. Different companies with different operations have very different ideas of what a good or bad EBITDA margin is.

 

[Brian Stirling]

Where are "all the folks" that claimed the 45% was profit? We are all aware you hate Apple, but please don't let that see things that aren't really there.

How many people here said "profit margin"? Or really refer to these as actual profits?

I refered to it as a "margin". Which it is, yes? and 40%+ EBITDA is HIGH, yes?

And the fact still remains. A 42% EBITDA with millions more revenue per month is better than 47% with less income. In the end they get MORE INCOME, not a higher percent of profit, but REAL MONEY.

Who likely makes more money (actual profits) - carrier 1 with a 40% EBITDA and a revenue of a $1 billion or carrier 2 with a 50% EBITDA and a revenue of $1 million?

Sure, relative to sales carrier 1 appears to perform worse, less efficient, whatever you want, but the ACTUAL profit is probably higher, because they make a ton more money.

Sure, it would appear carrier 2 has a better ability to earn a profit, maybe for every $1 they earn they keep $0.05, and maybe carrier 1 for every $1 they earn is only keeping $0.02. But carrier 2 stilll only earned $50,000 while carrier 1 earned $20,000,000.

Who's happier?

Understand? If the carriers earnings were going DOWN because of the iPhone they'd drop it.

They aren't.

You can't look solely at EBITDA to determine if something is good or bad.

Wrong on so many points -- where to begin???


I don't hate Apple any more than I hate Google. There are things about Apples business practice that I have and there are things about Android/Google that I hate. I get heat from Apple fans AND from Android fans...

There were a number of posters that jumped on the 45% number and implied that was profit -- not even Apple makes that kind of margin. Go ahead, read back over the posts here and you will see several folks that jumped on the 45% number as if it were profit.

Another poster point out that ATT made about 3% profit while Verizon made 2% -- that's a LONG way away from 45% and at the bottom end of what most companies expect for profit, 5%-10% being more the norm.

When the carriers have to pay Apple big money for the phone they charge us more to cover it -- that's the way business works. So, in effect, WE are paying Apple the extra profit -- not the carriers...

And you missed my point about the reverse ponzi thing ... the loss many of the carriers have because of the iPhone is a short term loss to cover the payment to Apple for the phone -- they make that up over the 2 year contract of course, but, because the number of new users is continuing to increase the payments to Apple increase and until there is some plateau in the sales figures the carriers will continue to run at a loss even though they will make a profit from each most customers. Again, if the sales for the iPhone were to flatten out then before long the carriers would make a profit.

I suspect the carriers lose a little from some of the Android phones -- at first, but just like the iPhone they will make there money back by the end of the 2 year contract. The difference is that they must pay Apple a good deal more for each 2 year contract they get than they do with Android phones.

So, if Apple fans claim I'm an Apple hater and Android fans claim I'm an Android hater I guess I must be doing something right/wrong...


Brian